The “gig” economy and employment status

During the 2020 election, the state of California determined how it would classify “gig” economy workers and what type of status and benefits they would receive. The “gig” economy refers to app-based service providers such as DoorDash, Uber, Lyft, and Instacart.

Lyft driver

Photo credit: Lyft

In order to determine what types of rights gig economy workers should have, California codified Assembly Bill 5 (AB5). This bill was a three-part test developed by the California Supreme Court, and used by state agencies and registered companies to determine whether a worker is an independent contractor or an employee.

Known as the ABC test, it requires a company to prove each element of a worker’s dynamic in order for them to be considered an independent contractor, thus freeing the company of obligations as it relates to mandatory benefits and employee rights under California law.

These elements include:

  • The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

AB5 exempts certain “professional services,” such as the legal field, from the test. Over the past year, gig economy companies lobbied for the passage of Proposition 22, which created a specific exemption for gig economy workers while providing some benefits.

lyft app on a phone

How does Proposition 22 affect Uber and Lyft drivers?

Proposition 22 overrides AB5 and classifies app-based service workers as independent contractors rather than employees. It does not affect how AB5 is applied to other industries. While this means that state employment labor laws would no longer protect these individuals, Proposition 22 does enact labor, wage, and anti-discrimination policies specific to app-based companies, including:

  • Requiring companies to pay the difference between net earnings and the minimum earnings floor created in Proposition 22 for the industry
  • Providing health care subsidies proportional to hours worked
  • Requiring companies to either provide or make available accidental death insurance and occupational accident insurance that provides disability payments

For Uber and Lyft workers, the flexibility of driver schedules is protected, as neither Uber or Lyft can prevent their drivers from working for other services, nor require drivers to accept specific ride requests. Proposition 22 also made false impersonation of an app-based driver a misdemeanor and requires gig economy companies to perform background checks. Uber and Lyft must also provide training programs related to driving, accident avoidance, sexual harassment, discrimination and drug and alcohol abuse prevention.

What does this mean for Virginia Uber/Lyft Drivers?

Unlike California, there is an open question as to the employment status of Uber and Lyft (and other rideshare platform) drivers in other states. According to the companies themselves, the partner-drivers are not employees but independent contractors. To date, neither the Virginia Supreme Court nor the General Assembly has weighed in to make a determination one way or the other. Therefore, the companies are allowed to treat their partner-drivers as independent contractors and not as employees. It remains to be seen whether the rideshare companies attempt to promote Virginia versions of bills such as Proposition 22.

If you have been injured as a result of an automobile accident involving a vehicle being used for Uber, Lyft or another rideshare company, please don’t hesitate to give us a call to discuss your options and rights. Call Allen & Allen today, at 1-866-388-1307.